Retire this pension plan

No one has ever accused Jon Corzine of being a master of timing, but he outdid himself on Thursday.

Early in the afternoon, the governor appeared before the annual convention of the state League of Municipalities in Atlantic City to propose a plan that would let municipalities defer about half of their annual contributions to the state pension plan.

Around the same time, news was breaking that the plan had suffered its largest monthly drop in history. In October, the plan lost a staggering $9 billion. In September, the plan lost $5 billion. The total loss so far this year is $23 billion.

And remember how the year began. The governor was touring the state touting a toll hike plan that he argued was necessary to shore up a pension plan that was even then $25 billion in the hole. There was simply no way the state could make up that deficit without doing something drastic, the governor told us.
He was right. And now the fund is almost twice as deep in the hole. So he proposes a pension contribution holiday?

Get real, Governor. That money lost in the market meltdown may never come back. In all likelihood, it went to "money heaven," the term Wall Street insiders use to describe the sad reality of what happens when a speculative bubble bursts.

And that has dreadful implications for New Jersey's public employee pension system.

Barring some incredible rebound in the market, there may be no way the fund can ever be made solvent again. The state's contributions into that fund this year will be $1.1 billion. Those municipal contributions, the ones Corzine wants to postpone, would amount to a mere $540 million. It's not just that those contributions are a drop in the bucket. They're a drop in a bucket with a hole in it.

Just before Corzine took office in 2006, his old Goldman-Sachs colleague Philip Murphy headed a committee that did a comprehensive review of a system that, even then, was in deep trouble. The committee's final report said that "restoring integrity to the system is critical but ultimately the current structure of the benefit programs cannot be sustained over the long term (unless taxes are to be significantly increased or other spending significantly cut)."

Those were the good old days. We are now at a point where the system may not be savable with any conceivable combination of tax hikes and spending cuts. In fact, we could devote every cent of next year's state budget to the fund and it still would not be in balance.

That report also said that the commitment to current workers must be kept. That's an enviable goal but one that won't be achieved if the fund falls into bankruptcy -- toward which it is hurtling, along with public pension funds all over America.

One way to avoid that fate may be to adopt a course the commission rejected: Ending the defined-benefit pension plan for new hires. That would have the effect of fixing the hole in the bottom of that bucket. Then we could concentrate on finding a way to refill it.

But perhaps Corzine has a different plan for coming up with the money to make the fund solvent. Perhaps he knows of something else we can sell or some tax that has yet to be raised. If so, let's hear it.

But here's a hint, Governor: A pension contribution holiday does not qualify as a good start.